Aspira Women's Health Inc.

Good morning, ladies and gentlemen, and welcome to Esperanza Women's Health Incorporated fourth quarter and 23 year-end earnings conference call. At this time, all participants are in a listen-only mode. Following management's prepared remarks, we will open the call for your questions. As a reminder, this call is being recorded today. Leading the call today are Nicole Sanford, Chief Executive Officer, and Torsten Holmbeck, Chief Financial Officer. After the prepared remarks, we will open the call for Q&A. Before we begin, I would like to remind everyone that forward-looking statements as defined on the Private Securities Litigation Reform Act of 1995 will be made during this call, including statements relating to ASPERA's expected future performance, future business prospects, and future events or plans. Although the company believes that the expectations reflected in such forward-looking statements are based upon reasonable assumptions, actual outcomes, and results are subject to risk and uncertainties and could differ materially from those anticipated due to the impact of many factors beyond Espera's Women's Health Control. The company assumes no obligation to update or supplement any forward-looking statements, whether as a result of new information, future events, or otherwise. except as required by law. Participants are directed to the cautionary note set forth in today's press release as well as the risk factors set forth in ASPERA's most recent annual report on Form 10-K and quarterly report on Form 10-Q filed with the SBC for a description of factors that could cause actual results to differ materially from those anticipated in the forward-looking statements. At this time, I would like to call the call over to Nicole Sanford, President and Chief Executive Officer. Please go ahead.

Thank you, Operator, and welcome everyone to our fourth quarter and year-end 2023 Earnings Conference Call. With me today is Torsten Holmeck, our Chief Financial Officer, who will provide a brief update on our financial performance after my prepared remarks. We will then open the call for questions. Before I begin with my update on our progress, I want to take a minute to discuss the incredible groundswell of support for more women's health research and better outcomes in the United States. We have worked with other advocates to raise awareness among both federal and state lawmakers about the challenges women face in securing adequate gynecologic care and the particular issues we face in accessing innovative life-saving tools like the biomarker tests offered by Aspira. Some of you remember Aspira's patient spokesperson, Diane Powis, who spent some of her last months of life preparing for and delivering to Congress a briefing that led to the introduction of new legislation. Perhaps fewer people know about our ongoing efforts to change state laws and coverage policies that impact women's health matters across the country. It has been a long, exhausting process that has required focused determination and the support of exceptional advocates and shareholders, and it finally appears to be paying off. President Biden recently signed an executive order supporting women's health research that opened up access to $100 million in funding through the newly formed Advanced Research Projects Agency for Health, or ARPA-H. Moreover, state legislation is being introduced around the country to expand coverage for biomarker testing. Last week, the state of Delaware passed the Faith Deanna Johnson Act aimed at improving access to detection and intervention services for those with a family history of certain types of cancers. They joined 15 other states that have already passed broad biomarker testing legislation and nearly a dozen more with those under consideration. We've also seen unprecedented interest in women's health research from the National Institute of Health and the Department of Defense. The most exciting thing about the additional opportunities is that many are focused on funding projects that play to our strengths. Strong ties to world-class academic and research centers, a demonstrated ability to launch and deliver tests in a commercial setting, and a pipeline of near-term products are just a few of the advantages we see for Aspira. We intend to continue our long history of working with changemakers in women's health to advocate for health equity and improve outcomes for women. And we are certainly eager to take full advantage of the new opportunities that are available to us in 2024 and beyond. Now let's take a look at 2023. It was an exciting and dynamic year filled with many changes and strong strategic execution. Throughout it all, we stayed true to our three touchstones for progress, growth, innovation, and operational excellence. I'll begin with a review of our growth this year, followed by an update on developments on the innovation side. I will then cover operational execution highlights, including some exciting recent leadership announcements. Improving our commercial capabilities was the most important strategic growth priority for us in 2023. Aspira's commercially available assays are, without question, revolutionary tools with the potential to substantially improve health outcomes for women. Despite steady volume growth, an inflection point has remained elusive. At the beginning of 2023, we completed a comprehensive review of our commercial ecosystem with the goal of identifying people, process, and technology enhancements. The results were telling. We needed to make sweeping changes throughout the organization to address competency gaps. In the summer of 2023, we launched a commercial refresh program based on the findings of our review to align our team and implement critically important changes aimed at ensuring our athletes would reach their full potential. It's hard to overstate the comprehensive nature of the changes we made. We recruited new members to the leadership team, created several high-level strategic roles to focus on national accounts and alliances, redesigned our sales incentive compensation plans, eliminated unprofitable territories, replaced underperforming reps, insourced marketing with experienced healthcare and diagnostic professionals, created an inside sales function, and expanded our data and targeting capabilities. We knew, though, that we would sacrifice some volume growth in the second half of the year by cutting unprofitable territories in order to properly rebuild our team and implement new processes and protocols. While we did see some softness in the third and fourth quarters of 2023, we managed to achieve 15% year-over-year growth in Oversweet revenues. Overwatch, which we introduced at the end of 2022, grew throughout the year as physicians recognized its ability to fill an unmet need in the clinical management of Nexomasters. Importantly, we accomplished this growth while simultaneously decreasing our sales and marketing expenses by nearly 50%, we had a total of 17 full-time salespeople at the end of 2023, down from 24 at the beginning of the year. Thanks to a sales team that is more experienced than at any point in the company's history, the average full-year OvaSuite test volume per full-time sales rep increased 50% from 779 in 2022 to 1,170 in 2023. We are approaching the end of the commercial refresh program and will be ready for the anticipated introduction of our new product. We expect to see more growth in 2024 as our improved sales team hits its stride and many of the important infrastructure improvements begin to make an impact. In fact, March has been a very strong month so far, even with several open commercial positions left to fill. Of course, the other critical component of revenue is price. The average unit price of our Oversuite techs increased to $383, up from $372 in 2022. Driving the improvement in AUP was the improvement in our market access capabilities, including a new PLA code for Overwatch, the approval of our CMS request to crosswalk the pricing of Overwatch and numerous expansions of commercial and Medicaid coverage. Let's move now to an update on our innovation efforts, which we see is fundamental to the creation of long-term enterprise value. Fortunately, we are extremely well positioned to successfully develop novel AI-based assays to aid in the diagnosis of gynecologic disease based on our extensive know-how and experience designing and launching blood tests for ovarian cancer. This experience carries with it benefits like our biobank of over 110,000 patient samples and data from thousands more. This is, of course, the extremely valuable raw material from which we build our future products, including those already in development. In January, we were pleased to update you with exciting developments we have made in both our ovarian cancer and endometriosis portfolios. In ovarian cancer, we have been developing clinical data to expand the use of our Overwatch test from a single-use test to a multiple-use test for the monitoring of an anexal mass. We believe many women can avoid the unnecessary or premature surgical removal of their ovaries, thereby avoiding lifelong side effects and a tremendous cost to the healthcare system. with the non-invasive monitoring of their masses. Surgery does not have to be the first step. However, proper assessment and clinical planning can only happen with the benefit of a reliable, clinically proven test that provides information on the mass. Overwatch is that critical tool. We have manuscripts currently under review by well-respected peer review journals. While we cannot predict when we will be accepted for publication, We believe the data clearly supports the monitoring of a mass to provide women with an alternative to premature or unnecessary surgical intervention. Also in ovarian cancer, we have spoken previously about OVA-MDX, the next generation non-invasive risk assessment test that combines serum proteins, clinical data, and microRNA. We are developing this test in collaboration with Dana-Farber Cancer Institute as part of a licensing agreement we signed in 2023. Based on initial research, OVA-MDX may provide higher specificity for all ovarian cancers and higher sensitivity for certain early-stage cancers when compared to existing technology, a major leap forward in diagnostic testing. We are in the process of completing our final test design, which includes completing the transfer of the test to an FDA-approved PCR system. We expect to complete this work along with the verification and validation of the assay by the end of 2024. Let's turn now to our endometriosis portfolio. Endometriosis is a significant problem for millions of women, up to 6.5 million women in the US alone, to be more precise. Based on a groundswell of advocacy, we expect proliferation of therapeutics to treat this disease, increasing the need for an easy to use, reliable, non-invasive diagnostic. We are well positioned to meet this need. In December 2023, we announced the exciting news that our work had produced the first ever protein biomarker test for the identification of endometriosis. Data from our studies clearly showed that EndoCheck accurately identifies ovarian endometriosis and endometrioma, one of the most common forms of endometriosis. We presented the data related to the performance of this test earlier this month at the Society for Reproductive Investigations annual scientific conference. We were thrilled by the reception and the level of excitement surrounding our work. We intend to finalize a manuscript for publication based on the data and complete an NIH grant application for additional funding for the remaining development and validation steps required for EndoCheck. We're currently evaluating the best commercial application and appropriate launch timeline for EndoCheck in light of the meaningful progress that has been made in the development of EndoMDX, our non-invasive test combining sealant proteins, clinical data, and microRNA for the identification of all endometriosis. Our successful sponsored research agreement with a consortium of world-class academic and clinical partners led by Dana-Farber Cancer Institute led to the development of a promising microRNA signature that is currently in the final test design stages. Much like our work with OVA-MDX, the test will be transferred to an FDA-approved PCR system before finalizing the algorithm and verification of the signature in 2024. As you can see, We intend to lead the way in the creation of non-invasive AI-based tests to aid in the diagnosis of gynecologic diseases. On the operational side, we welcome Dr. Sandy Milligan as president, who joins an already strong leadership team. As a seasoned executive with women's health and product development expertise, Sandy is coming in to accelerate our launch plans and secure new innovation and commercialization partnerships. She is an accomplished leader with a stellar reputation, and we are excited to have her join the team. We've come a long way, and I'm very proud of that, but we still have work to do to prepare for the much bigger opportunity in front of us. For the past two years, we have been methodically laying the foundation, brick by brick, for breakout growth. There is a growing optimism inside the company, a feeling that we are ready to reach our full potential, and this is a great way to start 2024. With that, let me turn it over to Torsten for an update on our financials. Torsten?

Thank you, Nicole. I will begin with a review of our fourth quarter results, followed by a review of our full year 2023 results. Oversweet revenue for the fourth quarter of 2023 was $2.1 million, which was flat compared to the fourth quarter of 2022. Revenue in the fourth quarter of 2023 benefited by strong year-over-year growth of Overwatch, which was offset by a decrease in our over one plus test volume. We also benefited somewhat from an increase in our overall average unit price, or AUP, which rose to $376 in the fourth quarter of 2023, compared to $369 in the same period of 2022. We have made headway in gaining additional reimbursement coverage for Overwatch, which continues to improve our overall AUP. Research and development expenses for the fourth quarter of 2023 increased slightly, while G&A was essentially flat, and sales and marketing expenses decreased by 40%. Moving to our full year 2023 results, OverSuite revenues improved 15% to $9.2 million compared to $8 million in 2022. Revenues benefited from our Overwatch sales volume increases and our improving AUP, which increased to $382 for the full year compared to 376 in 2022. Oversuite volume increased by 12% in 2023 compared to 2022. Our gross margins for the full year improved to 57% compared to 52% in 22, benefiting from lowered lab supply and shipping costs in 23 versus 2022. We made great improvements across the board last year in R&D, sales and marketing, and G&A spending. Our R&D expenses last year decreased 32% compared to 2022, Sales and marketing expenses decreased 48%, and G&A expenses were down 16% compared to 2022. Overall, our cash use and operating activities in 2023 was $15.9 million, down 49% compared to cash use and operations of $31.1 million in 2022. Our cash as of December 31st, 23, was $2.9 million, which was boosted by the $5.5 million in gross proceeds raised in January 2024 as part of our registered direct offering. On our existing equity purchase agreement with Lincoln Park Capital, we have approximately $8.4 million remaining available to us. Additionally, we are pursuing a number of non-diluted sources of cash including research grants. Our cash use and operating activities in 24 is expected to be between 15 and 18 million US dollars. With that, I will now turn the call back over to Nicole. Nicole?

Thank you, Torsten. We've come a long way this year, one that was punctuated by macroeconomic and geopolitical uncertainty and an overall softness in the diagnostic sector. The clear need for better tools for non-invasive gynecologic disease detection is increasingly being recognized by our national and state leaders, and this creates unprecedented opportunities for our business. We're taking all the steps we believe are necessary to position ourselves for success and will continue to be steadfastly focused on growth, innovation, and operational excellence. The energy in the company is fantastic now that we've done much of the hard work associated with right-sizing the business and upgrading our talent. Now we are in the exciting part of building it up and realizing our potential. With that, I'd like to now open the call for questions.

Operator? Thank you.

Ladies and gentlemen, we will now be conducting a question and answer session. If you would like to ask a question, please press star and 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star and two if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. Ladies and gentlemen, we will wait for a moment while we poll for questions. Our first question is from the line of Ross Osborne with Cantor Fitzgerald. Please go ahead.

Hello. Good morning. Thanks for taking our questions. So starting off with Overwatch LM, can you walk through the hurdles to getting your manuscript out? Is there another journal that could publish? And is publication a requirement for commercialization? And if not, why not go ahead and get the test on the market, given it has been delayed already?

Sure. Excuse me. Good morning, Ross. Thanks for the question. Yes, there's certainly other journals that we could submit the manuscript to. When you do that, of course, you reset the clock. So as long as the journal is reviewing the manuscript, we've made the decision to wait it out. We have gotten some comments, so encouraging there. And the answer is no, it's not required necessarily to have the manuscript. Ultimately, the decision to launch the test is in the hands of our lab director. So, you know, that really is, you know, the path that we are on at this juncture.

Okay, understood. And then maybe switching to pricing, how do you see price evolving throughout the year? And could you provide some color on where you stand on reimbursement efforts by each test?

Sure. So we've continued to see reimbursement improve for both tests. It's important to remember that as people adopt Overwatch in place of potentially using Overwatch off-label, That is good for lots of obvious reasons. We couldn't bill that Oval-1 test if it was used off-label. So now that Overwatch is there to meet that need, it is encouraging physicians to use Overwatch instead of off-label use of Oval-1, which clearly we don't recommend or promote in any way, right? So that helps both the Oval-1 price because we're collecting a higher percentage of those tests and Overwatch, which has... It's really surpassed our expectations in terms of how quickly it has trended up to meet the over one pricing. In terms of the broader reimbursement, we've brought in a whole new team, really experienced team that is focused on first and foremost closing the commercial gap, aggressively going back to any holdouts on over one, and then pressing forward with Overwatch for anyone who's covering over one. So we've seen some really great progress some really great progress in that area. We had a release earlier this year, so we're feeling really good about that.

Okay, got it. Are you able to provide an average denial rate and your success so far on appeals?

I don't have that information at the tip of my fingers here, Ross, but that's something we can look at in the future.

Okay, good. And then last one for me, and I'll jump back into you. So you, you know, resized your territories at the beginning of last year. You know, after two quarters, how are you thinking about your territories and headcount given we're through the one year this month? Thank you. Sure.

So we were at 17 salespeople at the end of the year. That included a number of inside salespeople. It's the first year that we were able to add those folks into the mix, and they've made a pretty significant impact right out of the gate. which was great. We have three roles that we're looking to fill immediately. Those are open right now. One based on turnover and the other are just additional roles that we're looking to add to new territories or expanded territories. What's really important is if we're going to add a new territory, we have to do it in the context of strong reimbursement and in the context of creating more opportunity through strategic relationships with physician groups and health systems. So, for example, for some time we've been targeting a large health system in the Midwest. I'm not ready quite to announce who it is, but targeting that health system there. And before we add a rep to that area, we want to lock in all of those critical pieces, including the medical policy, reimbursement, et cetera, et cetera. So, we're really confident in the territories and the reps that we have now. But we're going to be thoughtful if we're going to add more in the future. It's going to be built around success in the building blocks that will make that rep successful.

Understood. Thank you for taking my questions. Thanks for joining, Ron.

Thank you. Our next question is from the line of Sally Yantras with Water Tower Research. Please go ahead.

Oh, yes. Hello. I don't know if you can – Can you comment on the status of EndoCheck? Is it possible that it could launch this year? Or when will you have a better idea of when it could hit the market?

Sure. Thanks, Sally. So EndoCheck, we are really taking a hard look at how to best launch that test in the marketplace, as I mentioned in my remarks. I will say there has been a very, very high level of interest in that test in particular by NIH. And one of the program managers has strongly encouraged us to submit a grant application for the development of the test, which we are in the final stages of completing that application. So in the next week or so, I think that will be submitted. But there's a lot of excitement around that test as part of a broader panel for understanding the nature of an anexal mask. So very encouraged by that and also encouraged by the thought that we can get a big piece of that funded by NIH through a grant. So fingers crossed on that. But, you know, the other piece is really understanding the rapid development process for EndoMDX, which is going much faster than I think we had anticipated, and thinking about, you know, how does the protein R&D that we've done so far for EndoCheck lock into EndoMDX and how do we look at those two as complementary and or, you know, making a decision about which to launch and how. So it's great to have options, I guess, is the way I would characterize it.

Okay. And is there a lot of interest among the clinicians that your sales force targets? I mean, are they aware of this type of test of I mean, I guess how much interest and awareness is there among the physicians?

Yeah, there's a lot of awareness and a lot of excitement for an endometriosis test. Our clinical advisory board that we put together in 2023 has been really helpful in helping us to understand the need for endometriosis. Quite candidly, what we hear over and over again is there's nothing currently And so anything is really helpful, right? The only way to diagnose endometriosis today is through laparoscopic surgery, which is not ideal for anybody, but it's certainly even less ideal when you're talking about a pediatric patient, women with other comorbidities like obesity. These are people who are not good candidates for any surgery. So, you know, there's a lot of excitement and interest in the fact that we have now launched the first ever protein-based blood test or completed the design of, I shouldn't say launched, but completed the design of and verified the performance of a non-invasive test for endometriosis and endometrioma being the first target for endocheck. So a lot of excitement there. Our poster at the SRI conference, The endo check was one of the most popular poster presentations there, so I think it tells us a lot about the excitement that's happening.

Oh, that's great to hear. And are there currently therapies on the market to treat endometriosis? Yes, there are. Okay.

Yeah, there's two. Well, there's several that have been around for a long time, and then there's two that are more recent additions to the field. Both are indicated for pain management, for endometriosis. AbbVie has a drug on the market, and Myobon, which is now part of Sumitomo, also has a drug on the market. But when you look forward into the future, there are many therapies in development, and the need for a non-invasive or a non-surgical diagnostic is one of the things that's holding up progress. So, you know, we see... that the creation of an effective diagnostic will help accelerate the development of the drug therapies as well.

Of course, yeah. Okay, great. Well, thanks so much.

Thanks, Sally. Thank you. Ladies and gentlemen, if you wish to ask a question, please press star and 1.

At this time, there are no further questions in the queue. I will now turn it back to Nicole Sanford for closing remarks.

Great. Thank you, Operator, and thank you, everyone, for joining us. We really appreciate the support of our shareholders. We really appreciate all of you joining us today. Hopefully, you're hearing the excitement in my voice and Torsten's voice. The company is really well positioned in 2024, and we're Excited to get back to you in just a few short weeks for our first quarter call. So thanks again and enjoy a quiet day tomorrow.

Thank you. The Conference of Espera Women's Health has now concluded. Thank you for your participation. You may now disconnect your line.